7. I. Selecting the pricing objective
II. Determining demand
III.Estimating costs
IV. Analyzing competitors
V. Selecting a pricing method
VI. Selecting the final price
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8. The company first decides where it wants to
position its market offering. The objective
could be :-
Survival
Maximize current profit
Maximize market share
Maximum market skimming
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9. Each price will lead to a different level of
demand and have a different impact on a
company’s marketing objectives.
Demand and price are inversely related i.e.
Higher the price, lower the demand
So, Company needs to consider :-
Price sensitivity
Price elasticity of demand
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10. The degree to which
the price of a
product affects
consumers
purchasing
behaviors.
The degree of price
sensitivity varies
from product to
product and from
consumer to 10
11. Buying behavior
Inventory effect ( buyers can not store the product
)
Substitute awareness by buyers
Difficult comparison by buyers
Percentage of expenditure
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12. This determines the changes in demand
with unit change in price
If there is little or no change in demand,
when there is price change it is said to be
price inelastic.
If there is significant change in demand,
when there is price change then it is said to
be price elastic. 12
13. There are few or no substitutes
Buyers readily do not notice the higher
price
Buyers are slow to change their buying
habits
Buyers think that the higher prices are
justified
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14. Demand sets a price the company charge
for its product and Cost sets the floor as
company wants to set a price that cover
there costs also.
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15. 15
Fixed costs-doesn’t vary with production.
Variable costs-varies directly
Total costs: FC+VC
Average cost-TC/production
Profit= Price- Total Cost
16. Marketers are generally in a better position
to establish prices when they know the
competition’s prices; discovering
competitors’ prices may be a regular
function of marketing research.
Marketers in an industry in which price
competition prevails need competitive price
information to ensure their organization’s
prices are the same, or lower than, their
competitors’ prices.
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17. An organization may set its prices slightly
above the competition to give its products
an exclusive image, or it may use price as a
competitive tool and price its products
below those of competitors.
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18. The three major dimensions on which prices
can be based are cost, demand, and
competition.
An organization usually considers multiple
dimensions. The selection of the bases to be
used is affected by the type of product, the
market structure of the industry, the
brand’s market share position relative to
competing brands, and customer
characteristics.
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20. Markup is the difference between
the cost of a good or service and its selling
price
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21. Target return is calculated as the money
invested in a venture plus the profit that
the investor wants to see in return,
adjusted for the time value of money. As a
return on investment method, target return
pricing requires an investor to work
backwards to reach a current price.
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22. The valuation of good or service according
to how much consumers are willing
to pay for it, rather than upon its
production and delivery costs.
22
23. Setting a price for a product or service
using the reveling market price as a basis.
Going rate pricing is common
practice with homogeneous products with
very little variation from one producer to
another does.
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25. Pricing methods narrow the range from
which the company must select its final
price. In selecting that price, the company
must consider additional factors , inclosing
the impact of the other activities , company
pricing policies, gain and risk sharing
pricing , and the impact of price in other
parties
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